Nonprofit Insurance Program

D&O Insurance

By Alexa Connelly
June 05, 2013

Are you a director or an officer of a nonprofit looking for coverage or perhaps best practice solutions? Let me provide you with some valuable information on issues that can arise along with practice solutions pertaining to nonprofit businesses. We often hear the saying “Employees are your most valuable asset.” This is true to a point. However, employees and board members can also be your greatest liability.

There are important reasons why you need to protect your nonprofit assets and board of directors. However, the most important reason is the director can be held accountable for the acts of employees, clients, and stockholders. This can open your nonprofit to employment practice lawsuits and that is one reason why you need director and officer liability insurance. The second reason is that you will find investors and directors will be hesitant to risk their own personal assets to serve your nonprofit without this coverage. It is too risky, no matter how passionate they are about your cause.

Over 50% of claims are directly related to employment practice suits, which brings this area to be the largest in claim activity. You want to avoid this at all costs. Valuable coverage can protect your nonprofit in the event a situation arises.

      Best practice solutions incorporated into your nonprofit business model will help to analyze risks and provide the best solutions. Most directors and officers realize the risks and get deterred by daily operations of the business and fail to properly assess the risks. Nonprofits that may be strained already – due to reduction in revenue and a greater demand for their services – need to assess risks more frequently. When these issues are let go or looked over, it can cease the operation of your nonprofit.

The chief financial officer on your board should identify the top 10 risks your nonprofit faces. This should be done annually and, in some cases, twice a year is recommended. Your chief financial officer should then put together a risk analysis which outlines the risks and the problems they will cause. The chief financial officer will then implement those risks into policies and procedures with the sole purpose of eliminating the risks involved.

Key areas of risks for nonprofits can include:

  • Strategic risks which can impact the nonprofits goals and mission
  • Financial risks which can impact the assets of your nonprofits
  • Operational risks which can impact the operation of your daily functions of your nonprofits
  • Compliance risks which affect your nonprofit’s ability to comply with laws and regulations

In conclusion, best practice solutions will not only protect your nonprofit from risks,  they can set your nonprofit aside from others and help you to hire the best staff members,  volunteers, and board members to accomplish the goals of your nonprofit.

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